The ability to make efficient decisions is critical in a dynamic and changing environment, governing behavior ranging from the simple to the complex. Furthermore, altered decision-making is a hallmark of a number of diseases, such as epilepsy, major depression, and schizophrenia. In particular, value-guided decisions can be altered by aberrant processing of the history of recent rewards and the ability to use past experience to guide future decisions. While emerging work has outlined many brain areas involved in decision-making, how neural circuits decide is unknown. Theorists in psychology, economics, and ecology have outlined standard models of rational choice behavior, defining how optimal choosers should behave to maximize outcomes. In contrast to these theoretical predictions, empirical choice behavior in animals and humans often deviates markedly from optimality. Such inefficiencies likely reflect the constraints of a biological decision system, and studying rationality violations offers potential insight into the neurobiological basis of decision making. In this application, we examine the effect of previous history on the decision process and its underlying circuits. We hypothesize that temporal context-dependence in both value-coding neural activity and choice behavior arises from the way neural circuits represent value. Specifically, we hypothesize that adaptive value- coding is implemented using a standard computation widely found in sensory cortical circuits, divisive normalization, and that adaptation in perceptual processing provides a framework for understanding adaptation in valuation and decision-making. To test this hypothesis, we propose to undertake three aims addressing adaptation in value coding at the neural, computational, and behavioral levels. In Aim 1, we propose electrophysiological recording experiments to test whether the neural representation of value adapts to prior reward history, and whether this computation matches the divisive normalization algorithm. In Aim 2, we propose computational modeling experiments which will test the generality of the normalization model in explaining various, different value adaptation effects, and make specific predictions about the effect of adaptive value coding on choice behavior. In Aim 3, we propose choice behavior experiments, in both an animal model and human subjects, to test the prediction that adaptive value coding can selectively enhance the efficiency of choice. Understanding adaptation in value coding is crucial for understanding both standard and pathological choice behavior. Temporal history effects in decision-making are suboptimal in terms of rational theories of choice, but may reflect a more global optimality that balances choice efficiency and the constraints of operating a biological decision process. Such temporal-dependence may be particularly important for understanding affective disorders, such as depression and bipolar disorder, where prolonged periods of low or high reward states may significantly impede the decision process.